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THE YOUNG ICCA ARBITRATION BLOG IS A VIRTUAL SPACE FOR YOUNG PRACTITIONERS AND STUDENTS TO PUBLISH ARTICLES, COMMENT ON EACH OTHER'S ARTICLES, SHARE KNOWLEDGE AND EXPERIENCES AND INTERACT WITH THEIR PEERS.

From the previous publications on this issue, particularly a close review of case law on issue conflicts, one may conclude that it appears that the recent trend is to consider what a by-stander or a third party would believe in the circumstances. Has this always been the test? No, the text of the treaties and guidelines considered in the previous blogs has shown that the test did not envisage a third party inquiry. Nowhere in the text of these treaties is it succinctly and explicitly stated that what a reasonable and informed third party would make of the appointment of an arbitrator should be a primary factor in determining his or her suitability as an arbitrator.

From the earlier decisions, it has been seen from the previous blog post that the standard was that the arbitrators should not manifest any likelihood of failure to be impartial and independent in their judgment. Even the ICSID standard, which is believed to be broader, wider, and higher threshold, did not come close to introducing a third party consideration. All it requires is that the arbitrator be of high morals and able to exercise his or her duties independently.

The issue for consideration then is: have the tribunals introduced a new standard? Both the PCA and ICSID seem to have adopted this “new approach.” It is submitted that the standard has been taken too far: not only is the arbitrator expected to be of high morals and to be able to hear the case in an independent and impartial manner, in addition, an inquiry is to be made as to whether there is a likelihood that a reasonable and informed third party would find that a certain appointee would fail to make the decisions objectively and open-mindedly.

Or perhaps it is a question of interpretation? Can it be argued that this has always been the test? Can the existing standards in the various arbitration investment treaties be interpreted so generously and widely so as to subsume a third party approach in the relevant required criteria? The UNCITRAL standard is that the arbitrators may be disqualified if there are circumstances which give rise to justifiable doubts to their impartiality or independence. Can this be interpreted to mean that even a third party inquiry should be taken into account?

Indeed, it can be argued that the UNCITRAL model is somewhat vague, as it is does not state with precision which circumstances are to be taken into consideration to disqualify an arbitrator. The treaty does not provide guidance as to the precise factors which one is to look at in disqualifying an arbitrator on a particular matter. It thus remains one of the most unclear, ambiguous and vague provisions.

Even without the criterion under the UNCITRAL model, the question remains has a reasonable and informed third party always been considered in assessing the fitness of an arbitrator whose impartiality and independence is questioned? A thorough perusal and consideration of some of the cases based on the UNCITRAL rules do not show that the tribunal has always considered what the views of a third party would be. It is submitted that assuming I am wrong on this finding, that they did, then, their language has not been adequately precise such that it can be reasonably concluded that the tribunals engaged in a third party inquiry.

The ICC standard and the IBA guidelines are also clear on this point. Emphasis is on the arbitrators exercising impartiality and independence in reaching decisions. The standards, as currently stipulated, do not envisage a third party inquiry. In fact, the IBA guidelines, unlike the other standards, seem to be more detailed when it comes to disqualifying an arbitrator on the basis of previous writings.

Furthermore, under the ICSID framework, in addition to the requirement that the arbitrators be of high morals, they should also be persons who can be relied upon to exercise independent judgment. The thread running across this three series blog post is whether it can be said that in ensuring that the arbitrators can be relied upon in exercising independent judgment envisages a reasonable person test. It is submitted that this has not always been the requirement. If it has always been the test, then it has not always been as clear as it appears in recent decisions discussed in the previous blog post. It is further submitted that, if this has always been the test, then the tribunals have always downplayed the third party consideration requirement as it only seem to be popular in recent decisions.

From the foregoing, it can be concluded that there seem to be a new trend in the decisions rendered by the arbitration investment tribunals with respect to a reasonable and informed third party requirement as being part of the test necessary to determine an arbitrator’s fitness to be part of certain arbitration proceedings. This seems to be novel in the investment arbitration decision and raises very interesting questions. Such questions are: “have the tribunals raised the standards too high, or whether the prevailing standards are not adequate?”

Even if, assuming that this has always been part of the required standard, the argument remains that it has not always been given too much weight nor was it applied with sufficient vigour. The third party approach only seems to have found recognition, approval, and fame in recent days as opposed to the previous decisions. The tribunals are now clear that they are considering what a reasonable and informed third party would think of the appointment of arbitrators in particular circumstances.

As to the question of whether the arbitration tribunals have raised the bar higher, it is my considered view that, indeed, the arbitration tribunals, in so far as they have introduced a third party requirement in addition to the black and white provisions, then they have, indeed, raised the bar higher. It is my respectful view that those provisions as currently couched do not incorporate a reasonable person test, nor would it be correct to hold that they can be interpreted as widely as possible so as to subsume this “new requirement” in the prevailing standards.

CONCLUSIONS

The argument in this blog is not whether or not a third party test is wrong. The paper is mainly concerned with making an inquiry as to whether this approach elevates the prevailing standards of international investment arbitration on issue conflicts. It has been argued that the current provisions on these main investment treaties on issue conflicts do not envisage a third party inquiry which seems to have emerged in the latest decisions rendered by these tribunals.

It cannot be gainsaid that issue conflicts is one of the most challenging issues in investment arbitration that requires a lot of attention. It is therefore necessary that our tribunals should always be mindful of the need to engage in a balancing exercise in determining the fitness of an arbitrator participating in arbitration proceedings, so as to ensure that the standard is not taken so far so as to preclude qualified arbitrators from taking up their roles. There is a need to protect and defend the integrity of the investment arbitration. Accordingly, a balance needs to be struck at all times when the suitability of an arbitrator is called into question to ensure we retain well informed arbitrators, while parties are assured that their respective positions will be heard in an objective and open-minded manner.